5 Ways to Benefit from an Annual Mortgage Review

Greg Kuda, Vice President—Residential Lendinggkuda1_600

If you’re like most people, you probably meet with your financial advisor at least once a year to review how changes in your life and in the securities markets could impact your invested assets. However, few people think to request a similar check-in with their loan officer to conduct a review of their mortgage. Yet, periodically ensuring your current loan terms remain in your best interest is an equally smart money management move.

Your Biggest Asset Is Usually Your Largest Expense

With the recent recovery in home values in our area, it’s likely that your home equity has also increased. That rise may enable you to strengthen your overall financial situation or help you realize other financial goals.

For instance, if you bought your home several years ago and took advantage of one of the low-down-payment programs, your home equity may be high enough now that you are no longer required to pay Private Mortgage Insurance (PMI) each month. Being able to eliminate that expense either by having your home re-appraised or through a refinancing can reduce payments by $100 a month or more.

Similarly, if your family is expanding and you are thinking of adding on to your house, buying a vacation property, or your children are fast-approaching college age and you are looking for money to help pay for college, it could be more affordable to access your home equity through a second mortgage or by refinancing than through other financing arrangements.

5 Potential Benefits of Refinancing

  • Eliminate mortgage insurance
  • Pay off faster
  • Lower monthly payment
  • Cash out
  • Potentially reduce taxes

Where You Started Versus Where You Are Today

It’s natural that after making a big decision, especially one involving a lot of paperwork, like a mortgage, to resume your regularly scheduled life and not give it another thought. However, given the amount of money you have invested in your home and the size of your monthly mortgage payment, proactively managing your home loan through periodic reviews has the potential to help you meet more of your financial goals even sooner.

When to Review Your Mortgage

  • Interest rate environment changes
  • Life changes (marital status, new baby, college-bound child, retirement)
  • Remodeling or have plans to
  • Home equity rises above 20%

To schedule your annual mortgage review, contact your loan officer here or call 1-877-966-0202.

What First-Time Home Buyers Need to Know Today

Jocelyn Retz, 1st Vice President—Home Loans jretz

There’s a first time for everything. When it comes to home buying, having a resource who can show you the ropes and guide you through your financing options isn’t just helpful—it can save you money.

You Have Options…Lots of Options

First-timers have choices. Each of the mortgage programs serving first-time home buyers in our area have different terms, benefits and uses. Some are more appropriate for new construction, while others can provide added benefits if you are buying a fixer-upper.

Probably the most familiar option is the Federal Housing Administration FHA mortgage. These often have less stringent standards than most conventional lending programs. However, not all homes will qualify. While FHA-insured loans used to be the choice for those seeking to make a low down payment (with a 3.5 percent minimum), some conventional loans now offer an even lower down payment option for borrowers with good credit at just 3 percent.

Veterans have access to even more flexible programs with no down payment requirement. The further away you are from the Chicago Metropolitan area, the likelihood increases that you may be able to borrow through the United States Department of Agriculture (USDA), which offers another zero percent down payment program with attractive terms for those settling down in rural areas.

The State of Illinois, through the Illinois Housing Development Authority (IHDA), is another source of financing for first-time home buyers who work with Old Second. Its 1ST Home Illinois mortgage offers generous down payment assistance to working class families.

While a lot of buyers today look to their friends and family members for advice, the features and requirements of some of the better known mortgage programs have changed recently. By working directly with a community-based lender who participates in a wide variety of programs—not every lender does—you can make a more informed decision about what would be most advantageous for your financial situation. In particular, you can find out how much it will cost you over time.

Don’t Just Get a Mortgage—Get Advice

While many lenders now take applications online and communicate via text and email—Old Second included—having a person to talk to as your application makes its way through the review process can help you understand how it works and what additional requests for information mean. That said, the mortgage process isn’t as complicated as most people think. Compared to what borrowers go through to receive and repay a student loan, for instance, this can be much simpler.

Many of the conventional mortgages Old Second makes continue to be serviced by us after they close. Some clients find it reassuring that after the effort they make to choose the right lender, they will have an ongoing relationship with that same lender over the life of their loan. That is not typical outside of a community-based bank. However, the way we see it, our reputation as a bank, as employees and your neighbors is on the line when we work with you. We want to be there for you from the beginning of the process through your closing—and for the party to celebrate your paid-off mortgage!

For more information on how we work with our first-time home buyers, visit us here or call 1-877-966-0202. We can’t wait to talk to you about what we can do to help you succeed with your first big move.

 

How to Prepare for the Spring Home-Buying Season

William Schumann, 1st Vice President—Mortgage Sales 

William Schumann, First Vice President, Head of Mortgage Sales

William Schumann, First Vice President, Head of Mortgage Sales

Ready to make your move? Whether you are trading up, downsizing or taking your first plunge into home ownership, preparation makes for a more efficient process and, ultimately, more livable results. What you’re preparing for is more than a financial transaction—it’s a purchase that will influence your overall lifestyle.

Choose a Neighborhood

A good real estate agent can help you understand what a neighborhood offers and how it might match up with your lifestyle preferences. There are also a variety of apps you can download to help you get acquainted with an area’s walkability, its schools, and how well it will serve your daily needs.

Determine What “Home” Looks Like

Once you decide where you want to look, consider the type of home you are looking for. Many online listings now have walk-through videos to provide previews. Although, until you start walking through homes, knowing what will feel comfortable may be hard to gauge, especially if this is your first purchase.

Find Your Financial Comfort Zone

Once you develop a feel for your preferences, it’s time to start thinking about what you are comfortable with financially. You should consider where you are today, given your current income and debt levels, and where you expect to be in a few years.

For an approximate idea of what will be affordable, you can take a DIY approach and use the calculators that banks like ours offer to help you run the numbers. However, it’s typically more helpful to sit down and talk to a banker. A banker can also prequalify you, which will improve your understanding of how much of a mortgage you can comfortably afford, giving consideration to both the monthly payment as well as the total loan amount.

Speaking with a mortgage professional also alerts you to any programs you may qualify for. Currently, there are programs with special incentives for first-time buyers. There are also programs that make buying a property that will need immediate fixing up more affordable.

Spring Ahead

Spring is considered the kickoff to the home-buying season. This year, however, there is some incentive for starting to prep for buying a bit earlier.

Recently, mortgage rates increased. The rise was not dramatic, and though additional increases are anticipated in 2017, mortgage rates are expected to remain at the low end of their historical range. However, each increase adds to the cost of buying.

Another reason to start preparing now is that home values in many areas have recovered to their prerecession levels. Realtor.com forecasts that prices in our area could rise another 1.95 percent this year.[1]

For more information on how we can help you prepare for your home purchase, visit us here or call 1-877-966-0202. We can’t wait to talk to you about what we can do to help you make your next move.

Sources:

[1] Joe Kirchner, “Realtor.com®2017 National Housing Forecast,” Realtor.com, posted Nov. 30, 2016, retrieved Jan. 4, 2017.

 

 

Tips for Keeping Your Financial Resolutions

Joseph Huml, Vice President/Retail Regional Manager huml_portrait

Whether you are among the 41 percent of Americans who typically head into the new year equipped with a list of resolutions or are among those who just want to get your finances in shape, knowing how to move the dial from intent to progress can be tough.[1]

Here are some tips to help you succeed in boosting your financial health in 2017.

  1. Conduct a credit cleanup. Sometimes it helps to clear the slate by consolidating high-interest debt into lower rate loans. Homeowners, in particular, often find financial relief—along with financing for home repairs or unexpected expenses—by using a home equity line of credit (HELOC). Not only is the interest rate on this type of debt more affordable than other types of personal loans, the interest you pay may also be tax deductible.
  1. Join the club. To avoid feeling overextended by holiday spending next January, open a Club Savings Account this January. Arrange to have a small amount ($10–$25) transferred from your checking account with each paycheck. In late November, the accumulated amount will be transferred back into your checking account just in time for you to start shopping for the 2017 holiday season.
  1. Get more than credit. Compare the rates and rewards you receive on your current credit card to see if there are more attractive deals out there. Also, with many issuers offering attractive introductory rates for new accounts, moving your outstanding balances could potentially save you money.
  1. Up your reserve. While having an emergency reserve equal to at least three months of your regular expenses is advisable, it can be hard to achieve. A more attainable goal is to try to build up your emergency reserve gradually. For instance, consider setting up an automatic deposit for a modest amount from each paycheck that will allow you to end up with an additional month’s worth of emergency reserve by year-end.
  1. Experiment with bursts of retirement savings. While it’s hard to hit the maximum contribution limit to your retirement savings account each month, try raising your contribution during the three months a year when your expenses are lighter. These short bursts can add up over time.
  1. Get a second opinion. Take advantage of free investment consultations when they are available. Sometimes, a banker can see a better way to save on fees or interest expenses and may be able to provide insights into ways of allocating your investments for expected market changes.
  1. Improve your score. Review your credit reports and scores at least annually. Since your score influences the interest rates you pay—and even employers and landlords look at them—it’s beneficial to make sure yours is as high as possible. When you review your credit reports, look for any errors or omissions. Pay attention to the timeliness of the payments you do make. Late payments and skipped payments are the biggest detractors to your score.

For more information on how we can help you keep up your resolve to improve your finances this year, visit us here or call 1-877-866-0202. We can’t wait to talk to you about what we can do to help you make this your best financial year yet.

The One Thing You Need to Know About Investing

Steve Meves, Senior Vice President/Chief Investment Officer, Wealth Managementmevess_bus009xqc

Investing is about using the money you’ve saved to purchase an asset that will hopefully appreciate over time. The key word in that last sentence is “time.” Giving your investments sufficient time to grow, regardless of what you are investing in, is the hard part. It’s also a key ingredient to building wealth.

Market Movements Are Noise

The financial markets go up and down, sometimes within the same day. But throughout history, they’ve kept climbing. The indexes we use to measure investment results—the Dow Jones Industrial Index and the S&P 500 Index—reflect this jagged climb. It’s this historical proof of resilience through wars, political mayhem and underperformance that allows professional wealth managers to remain calm in the face of sell-offs. They’ve seen the charts and looked at the data on market closes. And, they know that sell-offs end with recoveries. These recoveries may take time, but eventually they occur and have led to a resumption in the historical upward trend.

Go Long

The mistake many investors make is in assuming they need to do something when markets sell off. That’s only natural. It hurts to see your account balances decline, even if it’s a short-term occurrence. Our brains are hard wired to feel the pain of a loss—in this case money—more intensely than we feel the joy of a gain. It’s why we are intuitively risk averse. No one likes the way they feel when they lose.

When markets do sell off—whether during a day, over several weeks or even months—we all impulsively want to avoid further pain by selling. Some even want to anticipate the loss by selling before markets ever start selling off.

Taking evasive action may feel good in the short run, but it can destroy investment results in the long run, because you need to be right about the market continuing to go down when you are out of the market. More importantly, you also need to be in the market during its recoveries in order to benefit. It’s hard to know on any given day the kind of day it will be.

When Is the Right Time to Invest?

When you are an investor and take a long-term view, any time can be the right time depending on what you are investing in. Therefore, it’s advisable to have access to wealth managers who actively monitor markets daily to determine when it makes sense to pull back on investing in securities, or types of securities, and when to add more. It’s also our job to keep emotions like loss avoidance from endangering your overall goals so that your portfolio is diversified over different types of assets. That way, it’s better positioned to withstand volatility in any one type of asset.

In the end, the secret to successful investing is to remain focused on why you invest: to build wealth over time.

For more information on how our goal-driven wealth management services keep you on task over the long term, visit us here or call 630-801-2217. We can’t wait to talk to you about what we can do for you today.

 

Non-deposit investment products are not insured by the FDIC; not a deposit of, or guaranteed by, the bank; may lose value.

A Different Way of Investing

Rich Gartelmann CFP® Senior Vice President/Head of Wealth ManagementRich Gartlemann Bio Picture

More often than not, when people talk about their investments, they talk about how well they did versus “the market” or about how much they gained in a single stock. The problem with measuring performance this way is that investing really isn’t like a sporting event where you keep score against an opponent. The only way you “win” is if you have enough money to achieve your financial goals. If you don’t, it won’t matter that your portfolio beat the S&P 500 Index for 10 years straight.

Focus on Results, Not Numbers  

When asked about their goals, often people will say, “I just want to have a million dollars by the time I retire.” That is a big round number, but is it enough? Too much? It depends on the type of retirement you want and the sources of income you’ll have available to support you.

Similarly, there are many investors who start selling stocks and buying bonds when they turn 65, because they believe that when they hit this age they need to invest conservatively. It may be the right action and, depending upon the current market condition, it may not even be a conservative move. Interest rate risks and rising inflation rates can devastate bond investments at certain points in an economic cycle.

If a person turning 65 today is in good health and still enjoys working, they are probably not ready to retire. Even if they are looking forward to retiring, they need to think about how to manage their assets in a way that will support them for another 30 years.

Match the Investments to the Timeframe

The trick to financial planning really isn’t the math as much as determining the journey. Think about where you are in your life and what you want to achieve next. Then, decide what you hope to achieve after that and, from a financial standpoint, what you wish to achieve in the long term.

The list will change over time, and it’ll be different for everyone. However, it may include things like:

  • Buy a home
  • Earn a graduate degree
  • Start a business
  • Pay for my children’s education
  • Pay off my home
  • Buy a family vacation home
  • Eat out whenever I want
  • Travel more
  • See every professional sports team play a game at home
  • Afford health care expenses
  • Avoid estate taxes for my family
  • Support charitable causes
  • Retire early
  • Just keep doing what I love and not retire

To know what you need to afford what you want requires adding some details to your goals and a timeframe. From there, your advisor can work with you to set a dollar goal and calculate how much you need to save to achieve it, if it is an expense. Your advisor can also help you decide how much you need to invest and how to invest your savings to create enough income to achieve ongoing goals, like retirement.

When it comes to investing, we focus less on the big numbers and more on helping you achieve big results.

For more information on how we approach and deliver goal-driven wealth management services, visit us here or call 630-844-5730. We can’t wait to talk to you about what we can do for you today.

 

Non-deposit investment products are not insured by the FDIC; not a deposit of, or guaranteed by, the bank; may lose value.

The Fixer-Upper Mortgage

Roger Legner, Vice President—Residential Lending legnerr_in0006qc

It seems like there is at least one in every neighborhood: a home in need of some TLC. Whether it’s a property that might have been neglected due to the foreclosure process, a property that was owned by someone who allowed the home to succumb to deferred maintenance or perhaps it’s your own property and in need of a facelift, the Federal Housing Administration (FHA) 203(k) Rehabilitation Mortgage was intended to provide financing in any of these situations.

203(k) Mortgage Programs: Standard and Limited (or Streamlined)

The two programs are open to both homeowners who want to refinance and buyers interested in fixing up a home.

Both programs:

  • Require the property to be owner occupied—they are not for investors who want to flip the home
  • Have low-down-payment requirements (3.5%) and, even then, the money may be gifted to the applicant
  • Are underwritten to standard FHA credit and income guidelines
  • Can be combined with any other FHA program available that the borrower may qualify for

The standard version of the 203(k) loan is used for more substantial repairs. These include things like moving walls, adding a room or repairing structural damage, in addition to cosmetic repairs. Essentially, this loan covers restoration that will exceed $35,000.

The limited, or streamlined, program is used for more basic repairs, such as replacing or fixing a roof or furnace, replacing windows, remediating mold or lead-based paint, purchase and installation of appliances, finishing a basement or improving accessibility for disabled inhabitants, etc. It’s limited to a maximum of $35,000.00 of repairs (including contingency reserve).

Since the purpose of both loan programs is to rehabilitate homes, the mortgage proceeds cannot be used to add luxuries like a pool or new outdoor kitchen, for example.

Go in With Open Eyes and Good Estimates

When using a 203(k) loan to purchase a home in need of repair, you are well-advised to walk through the property with a licensed contractor before submitting an offer. This helps ensure all the necessary repairs are accounted for and priced into your offer. It also helps to pay close attention during the appraisal and inspection phases of the purchase as well.

The program also requires borrowers to have licensed contractors bid on the work to be done. This is not a loan program for do-it-yourselfers.

Get Fixed Up Here

“Fixer-upper loans,” as 203(k) loans are sometimes called, are not a standard product. Many banks do not offer them, because they are quite a bit more complicated to close than conventional or standard FHA mortgages.

As a community bank, we have participated in the 203(k) program for years. We see it as another way to help our communities continue thriving while supporting homeowners and properties in need of a little extra TLC. We’d be happy to discuss the specifics of this program with you

When it comes to home-related financing, you can count on us to find a solution that fits your needs and helps you move on and into the home of your dreams. Contact me, Roger Legner, at 815-361-6469 or visit us online where you can begin your mortgage application right away, if you prefer. We can’t wait to talk to you about what we can do for you today.

5 Life Events That Benefit From Financial Planning

Kathy Diedrick, First Vice President—Retail diedrick

As you write your life story, there are likely to be chapters that completely change the direction of your narrative. Coincidently, these plot twists often come with financial implications. Getting advice at these points isn’t just helpful, it may be rewarding.

A 2010 study found that people who get advice regularly before making major decisions related to money end up with more financial assets than those who go it alone. So, when would seeking financial advice help?

Here are some of the bigger turning points in life, when some guidance can make all the difference.

Your first full-time job. For many, the thrill of a regular paycheck comes from knowing you don’t have to ask permission—it’s your money to spend as you please. But, before you do, it’s a good idea to take a breath, step back and add up what you need to spend each month. Then, think about what you want to spend on the things you do or buy for enjoyment.

It’s also a good idea to get in the habit of shaving off a little bit from each paycheck to start saving for the things you are going to want, like an annual vacation, getting an advanced degree, upgrading your car, owning your own home and, ultimately, retiring.

Talking to an advisor about the best options for living today while saving for tomorrow can help you get off to a good start. Making use of spending tools also helps.

You found the ONE! Making a commitment to share your life is huge, whether you find that person early in your adulthood or later on. It also means that when you start to live life as part of a couple, you should start spending, saving and planning as one. An advisor can help facilitate that transition by advising you on how to jointly own and hold title to your accounts and assets. They can also work with you to set up new savings goals. Calculators like this one can also help you keep track of things as your finances become more diverse.

Buying your first home. While you save for a down payment, you may want to work with an advisor—as well as a mortgage expert—to determine how much house you can afford and if there is a need to address your current debt and credit scores before applying for a mortgage.

Children change everything. From what you spend your money on to what you care about, when you start adding family members, it’s time to reevaluate. For many new parents, saving for college becomes an important goal. While our college savings calculator can help you set a target, an advisor can help you choose the right goal and savings method for your budget, along with a mix of appropriate investments.

Preretirement. The time to consider your plan for retirement is when you’re still working. This way you can make necessary adjustments before locking into any decisions. This tends to be the point in most people’s lives where they really want to meet more regularly with an advisor to make sure their savings are sufficient and their investment allocation makes sense.

No matter where you are in your life, we have the accounts, tools and individuals to support you on your financial journey. Contact us at 1-877-866-0202 to see how we can help. And, feel free to make use of our many financial tools along the way. We’re always happy to talk to you about what you want to do next.

Terms of Confusion: Straight Talk About Mortgages

Steve Weber, Executive Vice President—Residential Lending fullsizerender

It’s not you— it’s us, and we apologize. When it comes to talking about home loans, we sometimes forget that not everyone speaks the language of mortgages.

What sounds like code to you, often is—frequently it’s legal code. From 203 (k) loans to TRID, the mortgage process is riddled with references to the legal statures that lead to certain provisions, requirements or types of loan structures. To cope, we just start talking in shorthand. 

Deciphering Our Acronyms

Some of the most used terms within the industry are the hardest to understand. It’s not intentional. We just forget that we can lose you in the acronyms if you aren’t familiar with the language.

For instance…

APR (Annual Percentage Rate)

This is the total yearly cost of your mortgage, which is stated as a percentage of your loan’s amount. APR is not the same as your interest rate. The interest rate just refers to one expense. APR includes the cost of mortgage insurance (if you are paying it) and the loan origination fee or any points you paid. When you compare mortgage programs—or lenders’ rates—APR provides you with an apples-to-apples comparison to determine what will be most cost effective for you.

DTI (Debt-to-Income Ratio)

DTI is a key determinant in mortgage lending. We calculate it for every application. It’s used to qualify you for a mortgage by comparing your total monthly housing expense plus what you pay on your other debt obligations to the total amount of money you have coming in each month. The lower the DTI, the easier it will be for you to afford the mortgage amount you seek and typically, the easier it is for us to approve the request.

PMI (Private Mortgage Insurance)

Just for the record, PMI—which is also referred to as MIP under some loan programs—is the fee you pay if you buy a home with a down payment that is less than 20 percent of the purchase price, under most loan programs. The insurance is not on you, or your home, but on your ability to pay. What that means is that when a person puts down less than 20 percent, the loan is considered riskier for the lender. More risk means the higher the interest rate you are likely to be charged. But, mortgage insurance guarantees that the lender, or whoever ultimately holds your loan, will be paid even if the loan defaults. It also enables us to offer better terms than if you were to borrow without it.

These are just a few of the many terms and abbreviations that may crop up in a conversation during the mortgage application and approval process. As they do, please stop your lender. Call us out on our “secret” language and have us explain what we are talking about in plain terms. It’s your money and your home. You deserve explanations of the terms and conditions related to financing it.

When it comes to home loans, you can find your answers here. Contact us at 877-966-0202 with your questions or if you need an immediate definition, visit our online Mortgage Glossary. We can’t wait to talk to you about what we can do for you today.

5 Things Small Business Owners Should Know Before Applying for a Loan

Travis Andry, First Vice President—Commercial Lendingandry_travis_2012

Applying for a loan shouldn’t be intimidating. After all, banks are in the business of making loans. Finding a way to say “yes” is as high a priority for us as being approved is for you.

To help you focus your energy on what matters most in a loan request, here are five things to have in mind before applying.

  1. Your bottom line is more important than your top line.

Many small business owners focus their time and energy—and base their request—on top-line growth. While revenue growth is important, the financial strength of your business is measured based on your net profit. During a review, we spend much of our analysis understanding how revenue flows through your company. The reason is simple: we need to determine if there will be sufficient net income to repay any loan we might approve. But, we also look to see if another solution or a different type of financing is needed to address any cash flow issues.

  1. Don’t just say it; prove it.

While poor financial reporting isn’t a sign of a bad company, it can diminish your ability to document and support a loan request. Bankers need good information in order to understand how the business is really doing and how a loan may help. Before applying, it’s a good idea to make sure your inputs are correct and you can verify the numbers you’re submitting to us.

  1. “Why” is usually more important than “what.”

Often, clients will come in and say, “I need $50,000 for working capital.” But in the absence of additional information, what we hear is, “I have a funding shortfall.” Shortfalls occur, for example when a manufacturer has to pay for inventory and labor before ever shipping the finished goods or being paid. Often buyers take 90 days to pay. Covering shortfalls implies a different type of credit risk for us than a request for financing to replace a piece of equipment—or to add one—in order to improve efficiency.

If that is the purpose of the request, say so up front. In this instance especially, the gain in efficiencies is likely to create a savings that could help offset the increase in your financing expense. This would make it much easier to approve your request, which is why knowing the “why” is so important for us.

  1. Having a business plan is good, but it needn’t be a work of art.

Much is made of having a formal business plan before asking for a loan. It is a good idea, but bankers don’t need anything elaborate. It can be a bullet-pointed summary since a plan consists of projections, not facts. Although, plans do help us understand how you see your business growing.

  1. Bankers are more useful as advisors than adversaries.

While there are many online financing options that eliminate the need to make a face-to-face request, it’s ultimately more beneficial for a borrower to know—and be known—by a banker. Today’s loan request isn’t likely to be the only one you ever make on behalf of your company. It means you have a point of contact throughout the borrowing and repayment process and an advocate when you need to borrow again.

To learn more about how we work with you to build a sustainable relationship that can contribute to the growth of your business, contact me at 630-264-3004. You can also visit us here. We can’t wait to talk to you about what we can do for you today.